Key findings
Output and new orders return to growth
Firms resume hiring in February
Purchase prices and staff costs rise
Operating conditions for Ugandan private sector firms improved in February, following a brief decline at the start of the year sending the headline Stanbic Purchasing Managers’ Index (PMI) up to 52.6 compared to the January reading of 49.5.
Christopher Legilisho, Economist at Stanbic Bank said, “The Uganda PMI for February shows a private sector back in expansion, with both output and new orders growing robustly, after dipping in January. There was strong demand across all sectors. Employment in the private sector accelerated again after three months of decline due to increased new orders, whilst backlogs fell because of sufficient capacity. Purchasing activity was elevated as firms factored in output having recovered convincingly, but inventories fell for the first time in 12 months.”
According to February survey, renewed growth in part stemmed from expansions in output and new orders, which also saw fresh increases. Demand conditions reportedly strengthened, with companies also stepping up their input buying and staffing levels amid sustained confidence in the outlook for output.
However, Ugandan firms recorded greater cost burdens, as both purchase prices and wage bills increased. Subsequently, firms hiked their output charges for the sixth month running in a bid to pass through higher costs to clients.
“There was pricing pressures related to input and purchasing prices as utility bills and selected commodity prices increased. Staff costs and output prices increased for a further month but at a muted pace. The private sector remains highly optimistic about future output, although optimism has dipped slightly since January. The February PMI implies durable economic conditions in the private sector,” Legilisho said.
The monthly Stanbic PMI is compiled by S&P Global from responses to questionnaires sent to about 400 purchasing managers. The sectors covered by the survey include agriculture, mining, manufacturing, construction, wholesale, retail and services.
The Stanbic PMI is a weighted average of the following five indices: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%) and Stocks of Purchases (10%). Readings above 50.0 signal an improvement in business conditions on the previous month, while readings below 50.0 show deterioration.
Panelists stated that stronger demand and a return to new order growth boosted output levels. The fresh increase in new business resumed the sequence of growth seen since April 2024, which was briefly paused in January. Ugandan firms commonly highlighted the acquisition of new customers as a driving factor behind the upturn. In line with the trend for output, new order growth was broad based by sector.
Greater new sales spurred Ugandan companies to increase their staffing levels in February, thereby ending a three-month sequence of job shedding.
Of the five sectors monitored by the survey, only manufacturing recorded a drop in employment. The rise in headcounts reportedly helped ease pressure on capacity, as Ugandan firms registered a further decrease in backlogs of work midway through the first quarter.
At the same time, business expenses went up following increases in both purchase and staff costs. Greater utility bills and higher prices for selected materials were often mentioned as factors behind the latest round of inflation.
